Exam 4: Additional Income and the Qualified Business Income Deduction

Nick received a gift of stock from his father. Nick's father had purchased the stock 2 years earlier and his father's basis in the stock was $30,000. On the date of the gift, the stock had a fair market value of $25,000. a.If Nick sells the stock for $33,000, calculate the amount of Nick's gain or loss on the transaction. b.If Nick sells the stock for $22,000, calculate the amount of Nick's gain or loss on the transaction. c.If Nick sells the stock for $27,000, calculate the amount of Nick's gain or loss on the transaction.

Christian, a single taxpayer, acquired a rental house in 2006. The rental house, which Christian actively manages, generated a $15,000 loss in 2019. In addition, Christian owns a limited partnership interest which he acquired in 2011. His share of the partnership loss for 2019 is $10,000. Christian has modified adjusted gross income, before the rental loss and partnership loss, of $134,000. What is the amount of these losses that Christian may deduct in 2019?

Bill is the owner of a house with two identical apartments. He resides in one apartment and rents the other apartment to a tenant. The tenant made timely monthly rental payments of $550 per month for the months of January through December 2019. The following expenses were incurred on the entire building: Utilities \ 3,600 Maintenance and repairs 900 Insurance 500 In addition, depreciation allocable to the rented apartment is $1,500. What amount should Bill report as net rental income for 2019?

Thelma works at a liquor store in 2019 and makes $44,000. She also has dividend income of $12,000 and interest income of $1,000. She owns a beach house that gives her $11,000 in net rental income and she owns a stake in a limited partnership that generates a $15,000 loss. What is her adjusted gross income in 2019?

Warren invested in a limited partnership tax shelter in 2012. During 2019, his losses from the partnership amount to $100,000. If Warren has no passive income, what is the amount of Warren's deduction for passive losses for 2019?

If property is inherited by a taxpayer,

Selma owns a beach cottage that she rents to tourists. In the current year she rented the cottage for 90 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?

On August 8, 2019, Sam, single, age 62, sold for $210,000 his principal residence, which he has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2019, he purchased a new residence for $80,000. For 2019, Sam should recognize a gain on the sale of his residence of:

Net short-term capital gains may be offset by net long-term capital losses.

Accounts receivable are capital assets.

Wages are considered "active income."

Donald owns a two-family home. He rents out the first floor and resides on the second floor. The following expenses attributable to the total building were incurred by Donald for the year ended December 31, 2019: Real estate taxes \ 1,800 Mortgage interest 1,600 Utilities 1,200 Repairs (first floor) 1,400 Painting (second floor) 400 In addition, the depreciation attributable to the entire building would be $2,000. What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)?

Emily sold the following investments during the year: Stock Date Purchased Date Sold Sales Price a. 1,000 shares Dot Com Co. 03-21-2008 02-04-2019 \ 20,000 b. 500 shares Big Box Store 05-19-2018 01-22-2019 \ 8,200 c. 300 shares Lotta Fun, Inc. 10-02-2018 09-21-2019 \ 3,000 d. 700 shares Local Gas Co. 06-17-2018 11-11-2019 \ 14,000 For each stock, calculate the amount and the nature of the gain or loss.

If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.

Dividend income is considered "passive income."

If a capital asset acquired on October 27, 2011 is sold on April 30, 2019 for a gain, the gain is a long-term capital gain.

If property is received from a decedent, the taxpayer who inherits the property has the same basis in the property as the decedent.

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Which of the following statements is true?

Patrick owns a home on the beach in Daytona. He lives in the house for most of the year but leaves town during the popular motor sports race that comes through every year. During that time, he rents his home out for 3 weeks to race fans for $5,000. Which of the following is true?